CNI to Discontinue Old Tank Cars - Analyst Blog

In order to address safety concerns, leading Canadian freight railroad company, Canadian National Railway Company CNI, announced its decision to remove its fleet of 183 older DOT-111 tank rail cars over the upcoming 4 years. The company also mentioned that it will invest nearly $7 million by 2014 end to replace 40 of these tank cars to provide diesel fuel transportation. We believe the replacement of old tank cars will not only address the safety issues but provide greater operational efficiency to Canadian National's network.

Canadian National Railway aims to maintain high railroading (velocity, reliability, lowers costs and asset utilization) standards, which is reflected in its latest stance on phasing out old locomotives. In addition, Canadian National is continuously seeking productivity initiatives to reduce costs and leverage its assets.

The company equipped its locomotives with advanced technologies like Trip Optimizer and Wi-Tronix to increase fuel efficiency. Canadian National is committed to invest in technology and processes that will enhance the safety and handling of its products and also offer competitive advantage over other railroad carriers like Canadian Pacific Railway Ltd CP, CSX Corp. CSX and Kansas City Southern KSU.

It also seeks to open 2 new training centers in Winnipeg and suburban Chicago to enhance the skills of its employees. Canadian National expects a capital investment plan of C$2.1 billion in 2014. Approximately, C$1.2 billion of this would be spent on developing railway track infrastructure to enhance productivity and flexibility of business networks. Further, the company aims to direct C$600 million of the total on market expansion to increase distribution centers and construct intermodal terminals.

Moreover, Canadian National Railway will spend approximately C$300 million on the purchase of locomotives to augment the quality of the fleet and expects to take delivery of 45 new high speed engines in 2014. The company completed the investment of an additional C$100 million in the Edmonton-Winnipeg corridor that will support Intermodal growth.

Canadian National currently has a Zacks Rank #3 (Hold).